Qinetiq has reported a 22 per cent increase in underlying profit for the period ending March 31, but said that it would cut a further 400 staff as it restructures its European operations.

In a statement this morning, the group announced an 18 per cent increase in revenue as a result of favourable exchange rates and strategic acquisitions throughout the year.

Order intake was up 25 per cent following significant contract wins, and profit increased from £127m to £155m, resulting in a 9.6 per cent improvement in the overall operating margin.

Graham Love, the group’s chief executive officer, said: ‘This has been another good year of all-round progress for the group.

'We have achieved good organic growth, continued to transition our UK business and strengthened our offering through targeted acquisitions made during the year.

'We have improved operating margins, generated strong cashflow and won new contracts in growth markets.

'These results demonstrate the strength of our operations.’

Despite strong results, the group said that it was continuing to experience a decline in the MoD research budgets in Europe, the Middle East and Asia (EMEA), representing 15 per cent of revenues.

As a result, the group has made the decision to cut 400 staff as part of ongoing restructuring efforts.

According to Qinetiq, the job cuts would save £14m a year, resulting in one-off costs of around £40m.

However, unions have reacted angrily to the news, with Prospect national secretary, David Luxton, stating that Qinetiq’s decision to cut staff on the same day as posting record profits was unjustified.

Luxton said: ‘Our members are outraged that their hard work and intellectual excellence, which has contributed to Qinetiq’s ability to achieve a 22 per cent increase in profits, has been rewarded first with a pay freeze and now job cuts.

‘As the latest figures prove, Qinetiq continues to be a highly profitable company both internationally and in the UK, with a ‘backlog’ of secured work worth £5.4bn.

‘While the UK business may have been less profitable than overseas work, there is underlying revenue growth and profitability.

'Our members are already furious that the company imposed a pay freeze for 2009 while still paying bonuses to directors and senior managers.

This news will only strengthen resolve in the ongoing industrial action ballot over their zero pay increase.’

Qinetiq employs over 7,000 staff in the UK and operates major facilities in Hampshire, Malvern and Wiltshire.

A spokesperson for Qinetiq said that a decision on which sites will be affected will be delayed until autumn this year.